Find out about: Tax rates and codes Sole tradersA sole trader is a person trading on their own. They control, manage and own the business.
How does being a sole trader work?A sole trader usually has no formal or legal processes to set up the business. The owner/manager is personally entitled to all profits,
but is also personally liable for all business taxes and debts.
What are "drawings"?If you are a sole trader you're probably not paying yourself a wage, but simply taking money from the business when you need it for personal use. These takings are called drawings. They are:
- a part of your profit and taxed accordingly
- not a deductible business expense when calculating your profit.
Record your drawings in your cashbook so that you can reconcile your cashbook with your bank statements, ensuring that there is enough money in the business to cover any bills owing.
What are the tax rates for sole traders?A sole trader is taxed at the
individual tax rates.
Example
Sales |
$177,000 |
less all deductible expenses |
$108,500 |
Net profit (taxable income) |
$68,500 |